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Imposition of GST on supplies of digital products and services to Australian consumers

As was flagged in a Press Release issued by the Treasurer on May 11th, the Budget introduces what is described as an ‘integrity measure’. The measure imposes GST on supplies of digital products and services to Australian consumers from 1 July 2017. Dubbed the ‘Netflix tax’ – the measure targets foreign suppliers of digital content to ‘Australian consumers’ and is expected to raise an additional $350 million in revenue over the next four years. It does this by making supplies of things other than goods or real property connected with the ‘indirect tax zone’ where they are made to an Australian consumer.

The stated intention of the measure is to charge GST on supplies of digital products, such as the streaming or downloading of movies, music, ‘apps’, games, e-books as well as other services. In addition, the proposed measure will treat the ‘operator of the electronic distribution service’ as being the supplier. The rationale for this is to improve compliance and administration. Somewhat curiously, tangible goods are not covered by the measure.

On a more positive note, the Government also announced that it will not proceed with a measure announced in December 2013 which sought to replace the current GST-free treatment for supplies of going concerns and farmland with a reverse charge mechanism. This had caused concerns in the property industry that it could lead to additional stamp duty liabilities being incurred.

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